Baidu (BIDU) Beats Q1 Views, But Outlook Weighs; Analysts Comment

April 25, 2012 2:50 PM EDT Send to a Friend
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Baidu.com (Nasdaq: BIDU) shares are modestly lower following a rather strong first-quarter earnings report, as it appears investors were looking for more from the Google (Nasdaq: GOOG) of China.

Revs came in at $677.1 million with EPS of 87 cents, versus views expecting revs of $677.5 million and EPS of 84 cents.

Baidu sees second-quarter revs of $847.2 million - $867 million, versus the consensus of $860.16 million. This represents a 56.2-59.9 percent year-over-year increase. For more color on the quarter, click here.

Analysts chimed in on the numbers:
  • Goldman Sachs pointed to the in-line results and light outlook. Noted takeaways include the increase in customer base growth to 17 percent over last year's number, plans to maintain aggressive investments, further moves into cloud computing, and an increase in mobile Internet inquiries.

    Goldman lowered its EPS outlook for 2012 through 2014 by about 2 percent to RMB 28.53, RMB 39.27, and RMB 49.65, respectively.

  • Deutsche Bank sees search ad spending getting more allocation toward the second half of 2012, especially with Baidu's plans for investment likely weighing on margins. Deutsche Bank sees Baidu gaining more traction in mobile Internet, with it now becoming more of a gateway to online activities on the PC through Box Computing and integration of microblog content. Deutsche commented, "In relation to monetization of mobile traffic, we expect Baidu to adopt a keyword bidding model for search query and a commission model for app distribution. We view Baidu’s mobile traffic as largely under-monetized at current stage. Mobile search traffic represents 20% of total search traffic while its revenue contribution is insignificant."

    First-quarter TAC of RMB 331 million for Baidu came in below Deutsche's expectation of RMB 350 million.

  • Brean Murray & Carret pointed out a few positive indications from the quarter: "1) number of customers grew sequentially in 1Q for the first time since 2008, implying a robust start in SME growth; 2) customer deposits (a good leading indicator for revenue) grew 60 percent YoY in 1Q12, the highest 1Q growth since 2009; 3) average spending per advertisers declined 7.4 percent QoQ, implying the robust growth on SME, yet with big advertisers likely having a slow start."

    On expectations for bigger growth in the latter half of 2012, the firm said: "In 1Q12, average spending per advertiser declined 7.4% QoQ, implying the robust growth on SME, yet with big advertisers likely having a slow start. This is consistent with our channel check that with the general macro uncertainties in 1H, big advertisers are pushing out their budget allocation to 2H, although their overall budget allocations are growing solidly (indicated by annual framework contracts). In other words, big advertisers’ spending is pushed out to 2H, but not lost."
Baidu shares are off about 1 percent Wednesday afternoon.




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